Amber Enterprises tanks 18% on weak Q4 operational performance

In Q4, EBITDA margins declined by 240 bps to 6.5 per cent, due to delay in passing of higher raw material prices along with sharp increase in employee cost.

Shares of Amber Enterprises tanked 18 per cent to Rs 2,780 on the BSE in Monday’s intra-day trade in an otherwise firm market after the company reported a weak operational performance. The company’s earnings before interest, taxes, depreciation, and amortization (EBITDA) margins were down 240 bps to 6.5 per cent, due to delay in passing of higher raw material prices along with sharp increase in employee cost.

Amber Enterprises is a market leader in domestic room air conditioner (RAC) industry and air conditioning industry for mobility applications such as railways, metros, buses etc.

The stock has slipped 31 per cent from its record high level on Rs 4,023.65 touched on May 2, 2022. At 09:56 am, it traded 17 per cent lower at Rs 2,806, as compared to 1.1 per cent rise in the S&P BSE Sensex.

In Q4, Amber Enterprises consolidated revenue increased by 21 per cent year on year (YoY) to Rs 1,937 crore led by recovery in demand of cooling products and components. Profit after tax declined by 22 per cent YoY to Rs 59 crore dragged by lower EBITDA margin and higher interest outgo.

The management said after two consecutive years of COVID-19-induced lockdowns during the peak summer season, the company is witnessing an increase in demand for room air conditioners.

However, the geopolitical tensions have led to inflationary pressure on commodity prices and the Covid induced lockdowns in China has led to supply chain disruptions which have further added to the pain of the economy. Despite this, the company has been able to pass on majority of price increases and have been largely able to maintain it profitability, the management said.

ICICI Securities believe that a change in product mix and higher input costs impacted profitability in Q4. This, combined with higher interest outgo (up 77 per cent YoY to Rs 18.6 crore), resulted in sharp drop in the Q4 bottom line.

Although, the management commentary suggest company to achieve 30 per cent plus revenue growth in FY23E with recovery in margins. We believe price hikes and improved product mix are key variables to watch for the company's overall profitability, the brokerage firm said.